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World Economy a Cause for Some Optimism

(Refrain from an old song.) “There’s nothing surer… the rich get rich, and the poor get poorer…”

Maybe things are changing a bit.

The first part of the song is still true. In good times and bad, the rich get richer. But across the globe, the economy is making low-income people better off. The gap between the rich and the poor is not closing fast enough or maybe even at all. But workers are getting more income and consumers have more money to spend on things they want and can afford.

That is the sentiment coming out of the recent big meeting in Davos, Switzerland. It is an annual conference where business moguls meet with government officials. Along with a good many experts who attend the conference to give advice.

A low point in the world economy took place ten years ago. The Great Recession grew out of the United States. Lenders gave home buyers money to buy homes. Then the lenders sold the debt they had amassed. When home buyers fell short in payments, the lenders had no money to cover the missing payments. The economy around the world tanked.

The U.S. then led the way in recovery. Unstable oil and energy prices made a comeback harder. Now, most experts think the world economy is in a good position to grow. A strong world economy makes billions of people better off.

A good economy spread across the planet helps in other ways. It may mean that a turndown in one large country would not have a global impact.

There is good news from the nineteen countries using the euro currency. Growth is slow but steady. Elsewhere, Private firms are making big investments in Africa. Some see that continent as the next target for growth.

What are the experts worrying about? They are worried about political wars, real wars, trade wars, cyber wars and climate catastrophes.

Another concern? Great Britain has left the European Union. That could be the start of some countries deciding to reject being part of the larger trade world.

President Donald Trump is also a threat. Experts say trade wars can result when countries tax (impose tariffs) imports. This makes products more costly to buy. Trade wars could slow prosperity. Trump says he may pull the U.S. out of NAFTA (a U.S. trade agreement with Canada and Mexico). When he became president, Trump quit the big trade agreement with Pacific countries (TPP).

An expert said, “You get into a trade war, that is the real worry. The impacts on global growth would be quite severe.”

Another expert added, “There is basically no country in the world where the consumer is not doing well.”

For the first time since the financial crisis a decade ago, all of the world’s major economies are growing. Source: The Conference Board; Bureau of Labor Statistics | By Karl Russell